(At least) two solutions are on the table, Femtocells and Wi-Fi offload. Both approaches solve the backhaul issue by using customer or 3rd party links (DSL, DOCSIS, T1/E1, WISP or otherwise).

Femtocells are tiny mobile cellsites using the mobile operators' licensed spectrum, supporting all handsets and all services. Thus femtocells are a great way to extend coverage. If you want mobile voice service in a place where macrocell coverage is poor, a femtocell could be ideal. However, that's the only place where femtocell's have the advantage.

As a solution for mobile data capacity, Wi-Fi wins, for many reasons.

First, most mobile data is destined for the open Internet, not for someplace on the mobile operator's network. Multiple actual measurements of live traffic in different countries show 96%-99% of all bytes passed over the mobile data channel are destined for the Internet.

The mobile operator's NGN mobile core network is a complex network designed to support differential services, fine-grained billing and so forth. This makes it significantly more expensive than a best efforts network like the Internet and yet, no operator has found a way to charge for this extra capability — people just want to get to the Internet.

Femtocells are part of this complexity, and cost.

Second, the primary sources of mobile data demand are laptops, notebooks and smart phones. Laptops and notebooks have Wi-Fi connectivity. Half of smart phones have Wi-Fi already and the percentage is rising rapidly. So the major demand comes from devices that can connect to either femtocells or Wi-Fi hotspots. Thus the only potential disadvantage of Wi-Fi hotspots is gone or rapidly vanishing.

Third, Wi-Fi access points cost less than femtocells. Besides being somewhat simpler, they are being produced in very high volumes, far higher than the mobile operators are likely to achieve with femtocells. Femtocells might have made sense when they were first conceived, but today Wi-Fi has changed the landscape which leads us to...

Fourth, Wi-Fi access points are showing up everywhere. People are installing them in their homes but we also see Wi-Fi coverage in enterprises, in retail establishments and in public places.

Individuals spend most of their online time in just two locations: home and the office. Enterprises will not install Femtocells as the IT department can't control them. Consumers, retail and public locations have already done or are doing Wi-Fi. They won't install femtocells unless there is some form of subsidy from the operator — another cost with no net benefit.

Summary:

Femtocells will flop. They do provide a way to extend voice coverage into homes that macro cells don’t reach, but they are not efficient for data offload. Since Wi-Fi is efficient for data offload, and it costs less to buy and less to operate, Wi-Fi will trump Femtocells.

What should an operator do?

Mobile operators need to focus on providing bundles of connectivity, not on whether its 3G/4G or Wi-Fi. They should be encouraging Wi-Fi offload by bundling "free" public Wi-Fi access with their mobile data plans.

In the long term, it's likely most mobile data bytes will go over Wi-Fi. The 3G/4G network is still necessary to provide a backup path when no Wi-Fi is available. Mobile operators who recognizes this can still come out on top, if they focus on facilitating connectivity for their customers regardless of the technology involved.

Comments

Thanks, that's clearer. I was using a single Femto to improve mobile, allowing neigbours to connect, and suddenly I stopped using the POTS service all together, and it also showed I really only need a genuine mobile service if I am travelling quickly between cells. Most use is more nomadic than mobile.

The multi-vendor femto cell/wifi might be a way to push the operators off our turf a bit further. In terms of bits per htz this must be better us of spectrum that these macrocells. Although any device attached to a network of wifi 802.11n would achieve a similar outcome.

Mobile operators look more like device rental companies with an attached network.

Wi-Fi has lots of advantages, but femtocells have many complementary strengths. For the 'peaceful co-existence' view, see the Femto Forum's white paper: "Wireless in the home: the need for both 3G femtocells & Wi-Fi access points" http://www.femtoforum.org/femto/index.php?id=69.

Thanks Andy, that's an interesting white paper and it does bring up one Femtocell advantage (besides better voice coverage) that I missed, i.e. better handset battery life. While the original power requirements for Wi-Fi have been dramatically reduced, they still are not as low as 3G.

But, except for battery life and voice telephony, I wasn't impressed by their list of benefits. Touting things like access to "operator managed services with better quality of service" is a non-starter. There's been no adoption of such services beyond voice and SMS. Their suggestion of "seamless continuity with the macro network" is certainly true, but is likely to be solved in the long term by something like MPTCP (see: http://www.ietf.org/proceedings/75/mptcp.html).

I'm sure Femtocells will be deployed in some measure, but nothing like what was envisioned a few years ago, nothing like Wi-Fi and not widely enough to generate a return for those who've invested in Femtocell businesses.